In re Worldwide Wholesale Lumber, Inc., C.A. 06-01499-JW.

• Decision Date: 07 December 2006
• Docket Number: No. C.A. 06-01499-JW.,C.A. 06-01499-JW.
• Citation: 364 B.R. 197
• Court: U.S. Bankruptcy Court — District of South Carolina
• Parties: In re WORLDWIDE WHOLESALE LUMBER, INC. d/b/a Veracor Wood Products International, Debtor.

364 B.R. 197

In re WORLDWIDE WHOLESALE LUMBER, INC. d/b/a Veracor Wood Products International, Debtor.

No. C.A. 06-01499-JW.

United States Bankruptcy Court, D. South Carolina.

December 7, 2006.

COPYRIGHT MATERIAL OMITTED

Robert Frank Anderson, Columbia, for Wells Fargo Bank, Creditor.

Michael M. Beal, Bank of America Tower, Columbia, for Worldwide Wholesale Lumber, Inc., Alleged Debtor.

Joseph F. Buzhardt, III, Office of the United States Trustee, Columbia, for U.S. Trustee's Office, U.S. Trustee.

Jeffrey A. Chadwick, Katten Muchin Rosenman LLP, Chicago, IL, for AGM II, LLC, Creditor.

John D. Elrod, Greenberg Traurig LLP, The Forum, Atlanta, GA, for Wells Fargo Bank, Creditor.

Suzanne Taylor Graham Grigg, Nexsen Pruet Adams Kleemeier, LLC, Columbia, for Tianjin Jinnan Dist., Tongmei Timber Co., Wenan Xinda Wood Industry Co. Ltd., Petitioning Creditors.

Janet B. Haigler, Finkel Law Firm. LLC, Columbia, for Drayage Express, Corp, Creditor.

Janet B. Haigler, Finkel Law Firm, LLC, Columbia, for Drayage Express, Corp, Creditor.

J. Ronald Jones, Jr., Charleston, for Jack B. Hoy, Inc., Creditor. "

David B Kurzweil, Greenberg Traurig LLP, The Forum, Atlanta, GA, for Wells Fargo Bank, Creditor.

Linebarger Goggan Blair & Sampson, LLP, Houston, TX, for Cypress-Fairbanks ISD, Harris County, Creditors."

Lionel S. Lofton, Charleston, SC, for Russell Stadelman, II, Interested Party.

Ivan N. Nossokoff, Ivan N. Nossokoff, LLC, Charleston, for Russell Stadelman, II, Interested Party.

William Harold Short, Jr., Haynsworth Sinkler Boyd, PA, Columbia, for SK Shipping Co., Ltd., Creditor.

Charles Pelot Summerall, W, Buist, Moore, Smythe & McGee, PA, Charleston, for AGM II, LLC, Creditor.

John Robert Weiss, Duane Morris LLP, Chicago, IL, for AGM II, LLC, Creditor.

ORDER

JOHN E. WAITES, United States Bankruptcy Judge.

This matter comes before the Court upon the Application for Authorization to Employ Nexsen Pruet Adams Kleemeier, LLC (the "Application") as Special Counsel to the Chapter 7 Trustee and AGM II LLC's objection (the "Objection") thereto. The Objection seeks denial of the Application. After hearing the parties' arguments, the Court makes the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52, which is made applicable to this proceeding pursuant to Federal Rule of Bankruptcy Procedure 7052.¹

FINDINGS OF FACT

1. On April 12, 2006, the Tianjin Mills, Jack B. Hoy, Inc., and Nelson Sales & Marketing Co., Inc. (collectively, the "Petitioning Creditors") filed an involuntary petition against Worldwide Wholesale Lumber, Inc. d/b/a Veracor Wood Products International ("Debtor") for relief under Chapter 7 of the Bankruptcy Code (11 U.S.C. §§ 101 et. seq.)

2. On April 13, 2006. Debtor filed its Consent to Entry of Order for Relief, thereby consenting to entry of an order for relief under Chapter 7 of the Bankruptcy Code.

3. On April 18, 2006, the Court entered its Order for Relief under Chapter 7 and Order to File Statements and Schedules in the case.

4. On April 18, 2006, Michelle L. Vicira was appointed as the Chapter 7 Trustee (the "Trustee") to administer the bankruptcy case.

5. Nexsen Pruet Adams Kleemeier, LLC ("Nexsen Pruet") has appeared on behalf of Tianjin Jinnan Dist. Tongmei Timber Co. Ltd., Wenan Zinda Wood Industry Co., Ltd., Jiaxing Hengtong Wood Co., Ltd., Zaozhuang Hongrun Wood Co., Ltd., Shanghai Aviation Import and Export Co., Ltd, Shanghai Lian IMP, and EXP. CORP., Xuzhou Quianfan Imp. & Exp. Corporation and Xuzhou Xinxin Timber Co., Ltd. (collectively, the "Chinese Mills"), which are creditors and parties in interest in this case. Nexsen Pruet has represented two of these creditors in the civil action captioned as Tianjin Jinnan Dist. Tongmei Timber Co., Ltd. and Wenan Xinda Wood Industry Co., Ltd. v. Worldwide Wholesale Lumber, Inc., and AGM II LLC, 2006 WL 653457, Case No. 9:06-CV-0516, filed on February 21, 2006 in the United States District Court for the District of South Carolina (the "District Court Action"). The District Court Action is currently pending, but is stayed due to this bankruptcy case.

6. The Trustee proposes to employ Nexsen Pruet to assist her in pursuing potential causes of action against AGM II, LLC ("AGM"), a creditor and party in interest in this case. More specifically, the Trustee seeks to employ Nexsen Pruet as special counsel to assist her in further review and analysis of potential claims the estate may have against AGM, and if warranted, to pursue litigation against AGM on those claims for the benefit of the estate.

7. Pursuant to her agreement with Nexsen Pruet, the Trustee indicated that Nexsen Pruet will bill the Trustee at its customary hourly rates for its services rendered in connection with its representation as special counsel to the Trustee in this case. Actual compensation of Nexsen Pruet shall be set by the Court pursuant to 11 U.S.C. § 330(a) and, therefore, may be different from the terms of compensation agreed upon by the Trustee and Nexsen Pruet.

8. At the hearing on the Application, the Trustee represented that Nexsen Pruet has actively participated in this bankruptcy case in its representation of certain creditors and parties in interest and is familiar with the issues in this case.

9. On October 16, 2006, the Trustee filed the Application.

10. AGM filed" an objection to the Application on October 20, 2006. AGM seeks denial of the Trustee's Application on the following grounds: (1) Nexsen Pruet currently represents multiple creditor interests that are directly adverse to Debtor's estate, and (2) Nexsen Pruet has an "actual conflict" with Debtor. At the hearing on the Application, AGM further argued that because Nexsen Pruet has filed documents on behalf of the Chinese Mills, Local Rule 9010-1(d) requires Nexsen Pruet to continue to represent the Chinese Mills until the Court issues an order allowing Nexsen Pruet to withdraw from its representation.

11. On November 22, 2006, Nexsen Pruet filed a Motion for. Entry of Record Confirming Termination of Legal Representation, requesting an order confirming that it no longer represents the Chinese Mills and to the extent that any question remains as to the termination and release from representation, moving to be relieved as counsel. At the hearing on the Application, Nexsen Pruet represented to the Court that its representation of the Chinese Mills has been terminated and it has also filed a motion to be relieved as counsel in the District Court Action.

12. An order was entered on December 4, 2006 in the District Court Action granting Nexsen Pruet's motion to be relieved as counsel.

CONCLUSIONS OF LAW

The Bankruptcy Code provides the Court with broad discretion regarding the employment of professionals to work on behalf of the estate. Harold & Williams Dev. Co. v. United States (In re Harold & Williams Dev. Co.), 977 F.2d 906, 909 (4th Cir.1992)(citing In re Martin, 817 F.2d 175, 182 (1st Cir.1987)). However, the Court is instructed, within the confines of the Code, to exercise its discretion by taking into account "the facts of a particular bankruptcy case and the overall objectives of the bankruptcy system." Id. at 10. Thus, the Court shall examine the factual circumstances unique to this case in order to determine the merits of AGM's objection to the Application.

Section 327

Section 327 provides the applicable standards in determining whether Nexsen Pruet may serve as special counsel to the Trustee. In re Dunes Hotel Assocs., No. 94-75715-W, 1997 WL 33344280, at *6 (Bankr.D.S.C. Dec. 15, 1997)("Employment of professionals by trustees and debtors in possession is governed by 11 U.S.C. § 327"). Section 327(a) makes clear that a Trustee may employ counsel that (i) does not hold or represent an interest adverse to the estate and (ii) is disinterested. 11 U.S.C. § 327(a). See also In re Dunes Hotel Assocs., 1997 WL 33344280, at *6; In re Johnson, 312 B.R. 810 (E.D.Va.2004). "Holding an interest adverse to the estate" and "representing an interest adverse to the estate" is defined as follows:

[T]o hold an interest adverse to the estate means (1) to possess or assert any economic interest that would tend to lessen the value of the bankruptcy estate or that would create either an actual or potential dispute in which the estate is a rival or claimant; or (2) to possess a predisposition under circumstances that render such a bias against the estate.

To represent an adverse interest means to serve as an agent or attorney for any individual or entity holding such an adverse interest.

In re Air South Airlines, Inc., No. 97-07229-W, 1998 WL 34020727, at *7 (Bankr.D.S.C. Jan. 16, 1998) citing In re Roberts, 46 B.R. 815, 827 (Bankr.D.Utah 1985), aff'd in part and rev'd in part on other grounds, 75 B.R. 402 (D.Utah).

AGM first argues Nexsen Pruet represents an adverse interest warranting disqualification under § 327(a) because there is potential of litigation, either by way of a claims objection or an avoidance power action, between the estate and the Chinese Mills.² The Trustee stated, at the hearing that after a detailed review, she is not aware of any causes of action the estate should initiate against the Chinese Mills. The Trustee further argued that the Chinese kills' interests are aligned with the Trustee, because, as unsecured creditors destined to share equally in distribution with others in that class, they share the Trustee's interest in maximizing distribution. Considering the evidence presented, the Court is not convinced at this time that an adverse interest exists based on these grounds that should prohibit the employment under § 327(a).³

At the time of the filing of the Application, Nexsen Pruet represented the Chinese Mills as creditors in this case and two of the Chinese Mills as Plaintiffs in the District Court Action. However, on December 4, 2006, the District Court granted Nexsen Pruet's motion to be relieved as counsel in ...